Cabinet Pricing Methods
It seems like most of the custom shops go with a cost plus markup approach, beginning with either a linear per foot or per square foot cost. There are other approaches and I'm sure each company will have their own good reasons as to they their approach seems to work best for them.
From contributor L:
Know your costs and use those to price in a reasonable profit. The thing I've seen sink more small shops over the years is pricing too low. They don't price in all their costs or enough to grow the business. Where do you want to be in 5 or 10 years? Are you going to be able to sell your business and retire on the proceeds?
From contributor D:
All of the above, and then average it out. Follow this simple formula, and you can not go wrong. If I were in your shoes, I would do the following…
1. Make up a model kitchen, and do some secret shopping to determine what your competition is charging, and what the market will bear. Shop custom cabinets, and factory built of equal quality as you plan to produce.
2. Take the same kitchen and do a fine tuned analysis of exactly how much material, hardware, wood, varnish, and labor it takes to produce that kitchen. Be sure to include all of the sales expenses, and usually 2 trips back to each job for one reason or the other.
3. Determine your selling price.
Once you have this information, you can then establish a simple formula for pricing your work.
A quick test to see if you are on the right track are two of the oldest pricing tricks in the book:
Either one of these formulas should get you to a price equal to or less than what you have determined your market will bear. If everything is on track, you are ready to establish a simple pricing system for your salesmen.
Let's say your sample kitchen comes to:
Now you can price any kitchen with three simple steps. Here is how:
Let's say your next kitchen is
Now take the average of these three, and this is your selling price. Guaranteed not to fail you, as these are the three major components that determine your cost in building these cabinets. Your selling price here will be $10,232. This will be your base price. This may cover oak and maple raised panel with any variety of stain. Naturally, you will have to come up with a percentage add on for cherry, maybe 15%. You will also need a percentage for glazed finishes, perhaps 10%. You may calculate a reduction from the base price for flat panel doors, maybe 7%, and reduce maybe 3% for natural finishes. Then you will need to add any accessories such as trash pullouts, lazy susans, spice pullouts, knobs and pulls, etc.
This is about the most foolproof, safest, and simplest pricing method I have developed, and used successfully. It is very easy to teach to a salesman, and protects you at the same time. I have been in this business for 20 years, and I will say that this works!
The most important part of developing the exact numbers you use is to do the proper research in determining what your competition is charging, and what the market will bear. Once you know that answer, set your price anywhere from 3%-10% higher than what they are charging, and offer more personal and professional service and attention. Believe me, this may sound crazy, but customers will actually feel more secure and confident in you and your abilities if you are a little higher than the competition. 3%-10% makes them feel they are getting better quality and value, and they are eager and willing to pay the extra bit for peace of mind. 15% is too much. They will go with your competitor if you are 15% high.
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